As a new startup founder, it’s easy to get caught up in the excitement and passion of building your business. However, it’s important to also pay close attention to your startup’s finances, as this is what will ultimately determine the success or failure of your venture.
Here are the top 5 financial mistakes that new startup founders make and how to avoid them:
1. Failing to create a realistic budget
One of the biggest mistakes that new startup founders make is failing to create a realistic budget. This can lead to overspending, which can quickly deplete your startup’s cash reserves. To avoid this mistake, take the time to create a detailed budget that takes into account all of your startup’s expenses, including rent, salaries, marketing, and other overhead costs.
2. Not tracking expenses closely enough
Another common mistake is not tracking expenses closely enough. When you’re starting a new business, every penny counts, and you need to be able to account for every dollar that you spend. Make sure to keep detailed records of all your expenses and use accounting software or tools to help you manage your finances.
3. Failing to plan for the future
Many new startup founders are so focused on the day-to-day operations of their business that they fail to plan for the future. It’s important to have a long-term financial plan in place that takes into account your goals and objectives, and outlines the steps you need to take to achieve them.
4. Relying too heavily on external funding
While external funding can be a valuable source of capital for startups, relying too heavily on it can be a mistake. It’s important to have a solid financial foundation in place before seeking funding, and to only use external funding when it makes sense for your business.
5. Ignoring the importance of cash flow management
Cash flow is the lifeblood of any startup, and failing to manage it properly can be disastrous. Make sure to closely monitor your cash flow, and take steps to improve it if necessary, such as by negotiating better payment terms with suppliers, or incentivising customers to pay their invoices early.
By avoiding these common financial mistakes, you’ll be able to build a solid financial foundation for your startup, and increase your chances of long-term success.
Francis Fabrizi
Accountant
Keirstone Limited
